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A BUSINESS TALK WITH...

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June 2015



SIGNALS, DATA & MARKETS


Interviews of Jean-Christophe Babin, Mario Peserico, Manuel Emch, Adrian Bosshard, Ricardo Guadalupe and Rune Bruvik

 JEAN-CHRISTOPHE BABIN - BULGARI

Jean-Christophe Babin - CEO of Bulgari
Jean-Christophe Babin - CEO of Bulgari

“BULGARI IS NEGOTIATING WITH MORE THAN 200 RETAILERS WHO ARE NOT SUFFICIENTLY COMMITTED”

Jean-Christophe Babin, who has been Chief Executive of Bulgari for nearly two years, is aiming to put his brand in the Swiss watchmaking top 10. One crucial step will be to overhaul its points of sale worldwide.

You took over the reins of Bulgari in mid-2013. What are the results of your first full year as head of the brand?
We don’t give out specific figures. But I can tell you that Bulgari was LVMH group’s best-performing brand in 2014. We have grown significantly, both in jewellery and in watchmaking. Our aim remains to gain market share, to move from the top 15 into the top 10 of Swiss watchmakers, and to stay there. Our Lucea collection, in gold and steel, has an important role to play in achieving this objective. We have strong watchmaking potential because of our jewellery heritage. This potential has been under-exploited up to now.

So, which market, in your view, has the greatest potential for growth today?
The United States, no question. America is still an El Dorado: it has 300 million consumers, and they are particularly sensitive to good value. That’s where the Lucea collection comes in: it’s very attractive from this point of view, with prices starting at CHF 9,000. Japan is also an important market. We are also leading strong marketing offensives in Europe and Asia, with our muses Carla Bruni and Shu Qi.

How do you manage your watch distribution?
The division is undergoing some changes. We want to go for higher quality. We have 300 Bulgari sales points around the world (100 of which are franchises) and we are also present in 700 multi-brand stores. Currently it’s the mono-brand boutiques that are the most successful. We open another ten or so each year. As far as the multi-brand stores are concerned, we are in discussion with more than 200 of them who, in our opinion, are not sufficiently committed at this time.

You are launching a new ‘concept’ watch, a version of the Diagono Magnesium. How is it different from a smartwatch?
Smartwatches these days are just wrist-mounted mobile phones. Obsolescence, no added value... they are the opposite of luxury! The concept is incompatible with a high-end Swiss-made brand. We wanted to develop an intelligent mechanical watch. And what could be more Swiss than data security? Through our partnership with WISeKey, a leader in digital security and data storage, we are offering a vault on the wrist, combining precision and security (see explanatory sidebar).

When will it go to market?
By next spring. We started the process a few months ago, and we need several more months in development.

Bulgari Diagono Magnesium: how does it work?
Bulgari Diagono Magnesium: how does it work?
The Diagono Magnesium includes a cryptographic chip and an invisible antenna that enable the watch to transmit a digital certificate to the Bulgari Vault app installed on the user’s phone (iOS or Android) via NFC (Near Field Communication) technology. The app is activated when the watch is tapped against the smartphone, which also has an NFC chip. Only the owner of the watch has access to the confidential content, which is stored with bank-level security. The applications of this technology are potentially as extensive as the digital universe itself: passwords and PINs, obviously, payments, automatic calls, data transfer, but also direct marketing, plane tickets, even as a replacement for house and car keys.

 MARIO PESERICO - EBERHARD

Mario Peserico - General Manager of Eberhard & Co
Mario Peserico - General Manager of Eberhard & Co

“SOME GROUPS HAVE NEGLECTED EUROPE. WE HAVE BENEFITED FROM THAT.”

Eberhard & Co is one of those independent Swiss brands doing its best to survive in a difficult climate, made even more so by the strong franc. Interview with Mario Peserico, its general manager.

In a few words, how would you define the DNA of Eberhard & Co?
Men’s mechanical watches! Men make up around 90% of our clientele. And 60% of our watches are chronographs. This is particularly reflected in our Chrono collection. In 2001 we launched the Chrono 4, with its distinctive row of four counters. We produce around 16,000 pieces per year, all in the CHF 2,000–10,000 range. We target collectors.

What’s new for 2015?
This year we’re focusing on the Tazio Nuvolari collection, inspired by the Italian motorcycle racer and racing driver from the 1920s and ’30s. Our brand has a special connection with the world of motor sports. The collection includes a limited-edition dual time watch, the Tazio Nuvolari 336.

What are the main challenges you face this year?
As an independent brand our ongoing challenge is how to continue producing watches at an affordable price! We don’t have the resources to do a lot of technical development. We don’t make in-house calibres, we work with ETA and Sellita. Above all, we will be strengthening our four watch families. And I’m not forgetting women: our Gilda collection was launched in 2010.

How do you manage distribution?
We are present in some 500 points of sale around the world. We have no local branches, except in Italy. Europe remains our principal market: the Old Continent accounts for around 60% of our sales. Some groups have turned their backs on Europe in recent years, and we have made the most of that! Asia represents 25% of our market. I would also like to develop the United States. But Eberhard & Co still suffers from a lack of recognition outside Europe. It remains difficult to find shop window space; retailers are under pressure...

How are you reacting to the strong franc?
We have increased our prices in Europe by about 5%. We are absorbing the difference with respect to the total loss in value, which represents around 12%, by cutting our profit margins. From my point of view, the Swiss National Bank’s decision is incomprehensible and indefensible. Swiss retailers will suffer. The strong franc even has an impact at Baselworld, because it means increasingly higher travel costs for potential buyers!

 MANUEL EMCH - ROMAIN JEROME

Manuel Emch - CEO of Romain Jerome
Manuel Emch - CEO of Romain Jerome

“A CLIMATE OF SOME CONCERN IN THE WATCHMAKING INDUSTRY"

As a new generation of buyers emerges, conservatism in the watchmaking industry is ringing alarm bells for Romain Jerome CEO Manuel Emch. In his opinion, classicism is no longer a safe bet.

What is your take on the watchmaking landscape in 2015?
There are some strong imbalances in the market: fast-moving geopolitical upheavals, a complex situation in Russia, markets such as Japan getting a second wind, others – Hong Kong, for example – in difficulties, and some new, dynamic markets like the Philippines and Vietnam. But there is one common factor worldwide; a new generation of buyers is emerging, a generation that is more focused on events, lifestyle, experience... And that needs a new approach to sales and retailing.

What kind of new approach?
The main question is: how do we reach this young, dynamic clientele? And consequently, how can we find retailers with the ability to target young people? In my view we have to take a cultural, emotional and conceptual approach to reaching these clients. At Romain Jerome we are working with ‘legends’ connected with air, sea and land. These icons, such as the Berlin Wall, are in a way our playing field. But we also have to innovate constantly, because concepts have their limits. Innovation, paradoxically, creates stability. Generally speaking, however, I’ve observed a climate of some concern in the watchmaking industry.

Why?
Obviously, there is the smartwatch, which will have a strong impact on the entry-level. But I must also come back to this new, emerging generation, which has different references. Today, if I were a classic brand, and down in fifth place in my sector, I’d have good reason to be worried... Mentalities are changing quickly and profoundly. The watchmaking industry remains very closed. It needs to learn to open up. What is more, too many brands have opened own-brand boutiques in recent years. The customer experience in these boutiques is often disappointing. They are lifeless. And we are supposed to be selling emotion.

 ADRIAN BOSSHARD - CERTINA

Adrian Bosshard - CEO of Certina
Adrian Bosshard - CEO of Certina

“CERTINA DOESN’T HAVE AN IDENTITY PROBLEM WITH TISSOT”

The Swatch Group brand is hoping to stand out with its sporty, ultra-precise quartz watches. It has trebled its revenues in ten years. Meeting with Certina CEO Adrian Bosshard.

How do you differentiate yourself within the Swatch Group from other brands such as Tissot? Are your roles clear?
Yes. Our price range is quite similar, from CHF 300 to 2,000, with the majority of our sales between CHF 300 and 1,000. We are both in the highly affordable price range. But you could say that whereas Tissot is a ‘general’ brand, we are very sports-focused. Our DS Eagle chronograph, for example, is a perfect illustration of our sporting identity. Another feature we have is the use of Precidrive technology: these quartz movements offer the accuracy of a chronometer, with a working precision of ±10 seconds per year. Watches with this technology are eight to ten times more accurate than traditional quartz watches.

How do you achieve this degree of precision?
We have developed a number of innovative features, such as temperature compensation and an intelligent ceramic case that protects the movement from humidity.

What are your main markets?
Our primary market is Europe (55% of sales), particularly central and northern Europe. We have also enjoyed strong growth in Russia since 2008, although the devaluation of the ruble has obviously had a negative effect on sales. We also benefit from Swatch Group’s hitting power on an international level – it has 18 regional subsidiaries – to gain strength in other markets such as the Middle East and Asia, which currently represent just 12% of our sales.

How has Certina evolved over the last decade? Our revenues have trebled! Today we account for a little under 10% of the group’s revenues. Here too, our membership of Swatch Group is an advantage, for example in terms of after-sales service, which, as we all know, is a critical factor for the watchmaking industry. We don’t have any shops in Australia, but Australians can still send their Certina to Swatch Group’s Sydney branch for servicing. It’s an advantage that not all our competitors have. Swatch and Tissot have launched or announced smartwatches.

What about Certina? Swatch Group as a whole is intensively developing connected products. But the key thing is to ensure that there is genuine added value. We’re not going to blindly invest in this sector and get embroiled in the fitness wearables market: we remain a true watchmaking brand. Water resistance remains a critical selling point for us. With a Certina you can go for a dip in the lake, no problem...

 RICARDO GUADALUPE - HUBLOT

Ricardo Guadalupe - CEO of Hublot
Ricardo Guadalupe - CEO of Hublot

“PROVING THAT THERE IS REAL STRENGTH BEHIND HUBLOT’S MARKETING SUCCESS”

Women’s watches, insourcing of métiers, a China offensive, and the benevolent oversight of Jean-Claude Biver: a roundup of 2015 with Ricardo Guadalupe, Hublot CEO.

How do you see 2015 shaping up?
I predict a fairly flat year, despite a positive start. There have been some positive sell-in effects, but we need to maintain and even increase retail sales. We have just arrived on the mainland Chinese market, and only with our own-brand boutiques, but they are not really profitable yet. We continue to rely heavily on sponsorship, event marketing and ambassadors, such as Lang Lang in the Middle Kingdom. Other Asian markets are far more mature. We launched the Big Bang in Japan ten years ago now.

Your marketing style has attracted many imitators.
Yes, but we want to show that there is something solid behind this success – major innovations like Magic Gold, for example, which we developed in partnership with the EPFL. Nevertheless, our growth brings with it some major challenges. For example, how can we retain the concept of exclusivity if we grow production from 60,000 to 100,000 watches per year? In addition, as you know, the LVMH group is in the process of repositioning its brands, with the scale going upmarket from TAG Heuer, through Zenith to Hublot.

Presumably, this goes hand-in-hand with greater independence for the brand?
Absolutely. Our Nyon campus is currently undergoing some major construction work, to bring all our métiers together under one roof. We are aiming to have a completely integrated manufacture by five years’ time.

What are your main growth markets?
Japan and the Middle East in particular. But also the United States, where we now have 12 Hublot boutiques. I should also point out that, globally, the women’s market is looking particularly attractive. Today, 26% of our clients are women. We are aiming for 35%, and we’re counting on our new ambassador Bar Refaeli to achieve this! We are bringing out an increasing number of ladies’ models.

How do you manage distribution?
We are not retailers and we have no intention of taking their place. Of our 800 sales points around the world, around 70 are own-brand boutiques. What is particularly interesting is that the franchised stores are the most profitable. And not necessarily our flagship store in Place Vendôme...

What is your relationship with Jean-Claude Biver, who is now head of LVMH’s watchmaking division?
We are very complementary. He’s a marketing genius, he has one idea every minute. I try to stay near him to channel some of this energy! We remain in close contact.

 RUNE BRUVIK - FOUNDER OF BRUVIK

Rune Bruvik - Founder of Bruvik
Rune Bruvik - Founder of Bruvik

THE WATER OF THE FJORDS IN A WATCH

Young brand Bruvik is passionate about exploring its Norwegian identity, whether this be fjords, polar bears or the heritage of the Arctic explorers. Meeting with its founder, the dynamic Rune Bruvik.

How did the Bruvik brand come about?
I am a Norwegian designer. Ever since I got my first black Swatch, at the age of 15, I have dreamed of designing watches. Eighteen years later, the dream became a reality. My watches have a strong Norwegian identity, but I was determined that they should be Swiss made, and so I came to Switzerland. The adventure began in 2008. The Federation of the Swiss Watch Industry gave me its support. But I had a great deal to learn.

Nevertheless, you chose to start distribution in Norway, your home country.
Yes, in 2009. I spent three months knocking on the door of a retailer in Oslo, and eventually got a spot in the window – right next to Breitling. In the beginning they didn’t believe in me. You have to realise that Bruvik is the first real Norwegian watch brand. Retailers were justifiably sceptical.

What is your watches’ DNA?
The first prototype was in ceramic. But I moved on to something else with my first collection, Fjord, which, as its name suggests, contains water that I collected from a fjord. In general, watchmakers are looking for maximum water resistance: they want to protect the watch from water. I took the opposite tack, and put water inside the watch! Don’t worry, the watch is still waterproof! (laughs)

Are your other collections as Norwegian as Fjord?
Svalbard is just as Norwegian! It takes its name from the archipelago near to the North Pole. There are more polar bears there than people. The back of the watch features a map of the archipelago and some of its statistics. Our latest collection, Heritage, also has a very Norwegian DNA. It’s a tribute to the great pioneers of Arctic exploration, such as Fridtjof Nansen. The watch has the GPS coordinates showing how far they got.

What is your price range?
Prices go from CHF 800 to 3,500. We offer both quartz and automatic (ETA) models. One of our unique features is also our use of very finely worked sapphire crystals, which can represent up to half the total production cost of the watch.

Where are your markets?
The Nordic countries, naturally, and also the Czech Republic. At the moment we are selling around 1,000 timepieces per year. We are gradually growing. My dream would be to break into the American market, which I’m sure would be very attuned to our history and our ‘natural’ side. But also Japan, Germany and even the United Kingdom.

Source: Europa Star June 2015 Magazine Issue